Legal Articles

What is a Trust?

To put it in the simplest of ways a Trust is an entity set up by the Trust Founder, whereby the ownership of assets known as trust property is transferred to such Trust, to be controlled by the Trustees, for the benefit of Beneficiaries.

The essence behind a Trust is for the Trust to own property in its own right so that such property does not form part of the estate of the Trust Founder. A Trust, however, does not have legal personality.

The Trust can therefore acquire and accumulate properties and assets as a separate entity from the Trust Founder and persists even after the Trust Founder has passed on.

Where the Trust Founder creates the Trust in their lifetime it is known as the Inter vivos Trust (which will mainly be discussed herein), whilst a Testamentary Trust is one whereby the Trust Founder provided for its creation in his Will.

Advantages and Disadvantages of a Trust in South Africa

Amongst various advantages of having a Trust is the protection and preservation of assets and properties which when transferred to the Trust will not be affected by the personal estate of the Trust Founder.

Most Trust Founders set up a Trust to protect and preserve assets for the benefit of future generations within the family long after the Trust Founder and their generation has passed on.

The Trust is created and regulated by an instrument known as the Trust Deed, which is a document that provides for various aspects with regards to how the Trust is constituted and run. A tailor-made Trust Deed that has adequate provisions is important to achieve the smooth running of the Trust and to forestall various situations that the Trust may find itself in.

The Trust Deed must be lodged with the Master of the High Court together with other documents upon registration. In the event that all required information and documents are in order, the Master will issue Letters of Authority as Trustee to the nominated Trustees, who as at that date will assume authority to act on behalf of the Trust as its functionaries.

Since the landmark case of Land and Agricultural Bank of South Africa v Parker And Others 2005 (2) SA 77 (SCA) most Masters of the High Court require an independent Trustee, where the Trustees and beneficiaries are one and related under the Trust (family business Trusts). In this case several loans had been taken while purporting to bind the Trust as surety, which the Trustees later averred that the suretyship of the Trust was not binding.

An independent Trustee ought not to be related to the Trust Founder, other Trustees and Beneficiaries. Further, they must be in a position to appreciate the nature of the duties they are accepting as Trustee and be capable to discharge such responsibilities.

The duties of Trustees whether independent or not, are fiduciary in nature and it is expected that they perform their duties with diligence, care, honesty and in the best interests of the Trust and the Beneficiaries by seeing to it that the Trust is run in compliance with the Trust Deed, the Trust Property Control Act 57 of 1988, and any other directions of the Master or the Court.

Van Deventer & Van Deventer Incorporated – Attorneys South Africa

We assist with Trust matters in various aspects. Being a sophisticated area of law, we strongly advise Trust Founders, Trustees, Beneficiaries, and other parties having an interest in Trust property to consult with us pertaining to enforcing rights and guidance on Trust issues. We also assist in the formulation and compilation of Trust Deeds that have adequate provisions to cater for various situations.

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